1. Peeling the LTC Insurance Onion
FPA of NENY – May 16, 2019

2. Peeling the LTC Insurance Onion
A closer look into the often overlooked LTCi design features that can save premium or make a big difference come claim time!

3. Agenda Independent vs. Agency Home Care
Cash Benefit Options for Informal Care
Elimination Period Enhancements
Monthly vs. Daily Home Care
Shared Care
Creative Inflation Options
ROP options on Traditional LTCi
Traditional LTCi vs. Linked Benefit options

4. Peeling the LTC Insurance Onion
Independent vs. Agency Home Care

5. Independent vs. Agency Home Care
Most LTCi plans today require that the Certified Aide, LPN, RN, or Therapist be employed by a home care agency
There’s currently one carrier that allows the qualified caregiver to be independent and not employed by an agency
Allowing Independent aides/nurses is a huge advantage. The daily/monthly benefit will stretch much further while on claim as naturally independent caregivers can charge less

6. Peeling the LTC Insurance Onion
Cash Benefit Options

7. Cash Benefit Options
LTCi contracts today have an expense reimbursement chassis but some will offer a percentage of cash to be chosen in lieu of expense reimbursement for licensed care
Each month the insured elects whether they’d like 100% reimbursement for licensed care or take 30-40% of the daily or monthly benefit instead. This is a cash payout to be spent in any way they see fit and is not subject to the elimination period
This feature is a great adjustment benefit especially in the beginning of claim when the care may be minimal initially

8. Peeling the LTC Insurance Onion
Elimination Period Enhancements

9. Elimination Period Enhancements
Service Day EP - For many years the core chassis of LTCi policies had a service day elimination period (only days of licensed care is credited towards the elimination period)
Calendar Day EP - One enhancement option is a Calendar Day EP. Works more like a “waiting period” than a “deductible” – unlike service day EP. No out of pocket expense typically required as loved ones can provide care during the EP. Rider can cost ~3%
Waiver of HC EP - Another enhancement is Waiver of HC EP. This removes the deductible for a home care claim & often the carrier will allow days of home care as credit towards the facility EP. Rider can cost ~12-15%

10. Peeling the LTC Insurance Onion
Monthly vs. Daily Home Care

11. Monthly vs. Daily Home Care
Most LTCi plans have a cap per day for home care.
For example - $200/day is the limit for each day that home care is received.
Other carriers can have Monthly Home Care built in (or offered as a rider). So, instead of capping at $200/day one has $6,000 for the month to dice up how they need to
This feature provides greater flexibility while receiving home care

12. Peeling the LTC Insurance Onion
Shared Care

13. Shared Care
A Shared Care rider provides 2 great advantages to couples:
If one spouse runs out of benefits they can dip into their spouse’s policy and use some or all of their pool of money
And . . .
Upon one spouse’s passing, the surviving spouse will inherit all of the deceased spouse’s unused pool of money
Shared Care creates a bridge to link both policies together. This is an attractive rider to consider when perhaps one spouse isn’t as onboard as the other spouse. Rider adds ~15-20%

14. Peeling the LTC Insurance Onion
Creative Inflation Options

15. Creative Inflation Options
Naturally Inflation protection is the most expensive LTCi rider so looking for ways to save premium is paramount
The industry “norm” today is 3% Compound but if the client intends to use their policy in more of a rural area consider 2% Compound (savings of ~20% over 3% Compound)
Also consider capping the back end of the inflation. One carrier offers a 10yr, 15yr, & 20yr inflation cap. A 20yr cap on a 60yr old client can save 20%!
That same carrier also offers inflation riders with a Buy-up / Buy-down feature. Allows one to increase their inflation percentage w/o additional underwriting or back down their inflation without losing the growth.
Another carrier doesn’t offer a fixed 3% option. They offer a “Tailored” option, which means that through age 60 one grows by 5%, ages 61-75% they grow by 3%, then the growth ceases at ages 76+

16. Peeling the LTC Insurance Onion
Return of Premium (ROP) Options on LTCi

17. ROP Options on LTCi
One carrier currently includes an ROP to age 65; another includes an ROP to age 67 at no cost
One carrier also offers a very affordable “3x MMB” ROP option. One would receive 3x their max monthly benefit (A $6K/month plan would provide an $18K ROP (less any claims paid out) so long as policy has been inforce for 10+ years. Rider adds ~12%
Two carriers currently offer a full ROP less claims paid out rider. One’s premium is more economical at a rider cost of ~40%, whereas the other carrier’s tends be double the premium.

18. Peeling the LTCI Onion
Is the client concern, “what if I never need Long-Term Care?”
In other words, are they worried about “use it or lose it?”

19. ROP Case Study Case Study – LTCI vs. Life 55 year old male
NT user, preferred (life); standard (LTCI)
$6,000 per month; $300,000 lifetime LTC/Chronic benefit
100% HHC benefit
Non-inflated benefit
Level death benefit on life; no inflation on LTCI
This is important, as that’s not always the comparison

20. Peeling the LTCI Onion Just what is “Linked Benefit?”
Usually single premium (maybe able to spread out over 3,5,7 or 10 years in NY)
Single premium buys death benefit and LTCI benefit pool
The “1-2-5 plan” (depending on age, etc.) as some call it
E.g. $1 of premium buys $2 of death benefit and $5 benefit pool for LTCI
Life insurance with an LTCI rider is different!
With those, the death benefit is being “accelerated”

21. Peeling the LTCI Onion
So which one is “best?”
It depends!

23. And we added one additional feature…

24. And we added one additional feature…

25. Traditional LTCI vs. Life with a Rider
Life w/Rider may be best client solution for:
Maximization of death benefit
Guarantee of future premiums
Ability to plan for multiple events
Those who may want to have third party ownership of policy
LTCI w/ROP rider may be best client solution for:
Most cost effective LTC benefit per premium dollar
Those less/not concerned with premium return at death can exclude rider
Those more comfortable with current LTCI premium levels

26. Considerations No ONE solution is “best” for everyone
Consider financial logic vs. human emotion – e.g.:
What if I never use it?
Concern over rate increases on LTCI
P.s. November 217 SOA LTCI Pricing Study
The “rear view mirror” vs, the “windshield”
Questions?